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RFE/RL NEWSLINE Vol 3, No. 68, Part I, 8 April 1999
________________________________________________________ RFE/RL NEWSLINE Vol 3, No. 68, Part I, 8 April 1999 A daily report of developments in Eastern and Southeastern Europe, Russia, the Caucasus and Central Asia prepared by the staff of Radio Free Europe/Radio Liberty. This is Part I, a compilation of news concerning Russia, Transcaucasia and Central Asia. Part II covers Central, Eastern, and Southeastern Europe and is distributed simultaneously as a second document. Back issues of RFE/RL NewsLine and the OMRI Daily Digest are online at RFE/RL's Web site: http://www.rferl.org/newsline xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Headlines, Part I * RUSSIA RETHINKING MILITARY DOWNSIZING * DUMA SAYS NO TO POLITICAL PEACE TREATY * KAZAKHSTAN'S TENGE STABILIZES END NOTE: Mostly Silence On Impact Of Kazakh Currency Float xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx RUSSIA RUSSIA RETHINKING MILITARY DOWNSIZING... Defense Minister Igor Sergeev announced on 7 April that his ministry intends to revise its plans for reducing the size of Russia's armed forces. He told reporters that the current size of the army with 1.2 million soldiers could not be lowered and that combat units would be reinforced with auxiliary formations. Sergeev linked the revision to NATO's new strategic concept, adding that "the steps which NATO has taken against Yugoslavia increase our anxiety." "Kommersant-Daily" reported the same day that Duma legislators have rediscovered their commitment to military spending and that the military is already spending more money, roughly $2 million extra since NATO bombing began on 24 March, on a variety of texts and the de-mothballing of one S-300 anti-aircraft missile system. According to the daily, "a fundamental review of the law on the budget is proposed in favor of the military-industrial complex." JAC ...AND VERIFYING YUGOSLAV MILITARY INTELLIGENCE REPORTS? "Segodnya" argued on the same day that one source of anxiety for the General Staff may be the lack of reliable information about manpower and equipment in the conflict zone. It notes that the "General Staff remains confident about Yugoslav air defense systems," but they are not offering any evidence of the system's good performance, which suggests that they themselves are having difficulty obtaining such proof. Therefore, the mission of the intelligence-gathering warship recently dispatched to the Adriatic is not only to track NATO "but also to verify the reliability of the information that Belgrade is sharing with Moscow." JAC YELTSIN REJECTS PROPOSAL TO SUPPLY ARMS TO YUGOSLAVS. The State Duma adopted a resolution on 7 April that President Boris Yeltsin and the government consider supplying Yugoslavia with weapons, military hardware, and relevant spare parts. The measure was supported by 279 deputies, with 34 against and four abstentions. That day, presidential spokesman Dmitrii Yakushkin responded to the action by reporting that Yeltsin believes that the conflict in Yugoslavia offers no military solution and that arms shipments would mean "a slow introduction of Russia into the war" and an "inevitable escalation of the conflict with unpredictable consequences." Addressing the success of the efforts of the president and government to convene a "Group of 8" meeting on the Kosova crisis, Foreign Minister Igor Ivanov said that "what matters is that Western capitals have not yet said a definite 'no,' although they have not said a firm 'yes' either." JAC DUMA SAYS NO TO POLITICAL PEACE TREATY... The State Duma rejected the political stability accord on 7 April with only 137 deputies voting in favor; 226 votes were needed for it to pass. Under the document, which a working group--composed of various members of Russia's branches of goverment--spent many weeks drafting, President Yeltsin would have agreed not to dismiss the government and the Duma. And in turn, the president and the Duma would not raise the issue of confidence in the government without a prior consultation with each other. In one recent version of the document, the president would agree that a government of the parliamentary majority would be formed after elections, but the Kremlin deleted this from the draft it signed (see "RFE/RL Newsline," 22 March 1999). JAC ...YES TO LAW ON PORNOGRAPHY. The same day the Duma adopted legislation "on state protection of the morality and health of the population and on the enhancement of control over trade in products of a sexual nature." The bill was supported by 234 lawmakers and opposed by 121 with one abstention. Under the legislation, trade in "sexual" products must be conducted with a license and such products must be sold only in "specially designated locations." Television and radio broadcasts of erotic programs will be restricted to between 1-4 am. The "Moscow Times" reported that during an earlier debate on the same bill in October 1997, two deputies lapsed into a dispute over the merits of domestic versus foreign- produced condoms. JAC SKURATOV'S FATE TO BE KNOWN ON 21 APRIL? In his address to the Duma on 7 April, Yurii Skuratov, who is currently suspended from the post of prosecutor-general pending the outcome of a criminal investigation, refused to offer eager legislators details about criminal investigations into the activities of some top Kremlin officials. He also refused to confirm or deny whether he was the man in a videotape televised earlier romping with two young women. He did attack the Kremlin, saying that "never before have corrupt officials cast such a brazen challenge to the law." He also said that he will stay in his job if lawmakers support him. Federation Council Committee for Constitutional Legislation head Sergei Sobyanin told reporters that the upper body might hold an extraordinary session on 21 April to discuss Skuratov's resignation--after the body has been provided with exhaustive information on the issue. JAC PRIMAKOV REJECTS HOSPITALIZATION. Prime Minister Yevgenii Primakov was expected to stay at home on 8 April to recover from radiculitis, ITAR-TASS reported that day. According to the agency, doctors recommended hospitalization, but Primakov categorically refused. AFP had reported earlier that Primakov's back ailment was sciatica. JAC BEREZOVSKII PLEDGES TO RETURN TO RUSSIA NEXT WEEK. Influential business tycoon Boris Berezovskii told reporters in Paris on 7 April that he will return to Moscow next week to explain his "situation" to prosecutors. However, his lawyer, Genrii Reznik, told Interfax that Berezovskii "must not return under any circumstances," since the Prosecutor- General office "does not even feign an observance of the law." Meanwhile, SBS Agro bank head Aleksandr Smolenskii will remain in Austria, where he is a citizen, and continue his treatment for the flu, according to his press spokesman, Eduard Krasnyanskii, the "Moscow Times" reported on 8 April. Krasnyanskii called the prosecution of Smolenskii "bizarre" and an attempt to dredge up issues that were long ago resolved. The same day, Deputy Prime Minister Gennadii Kulik said that Smolenskii's legal difficulties would not affect SBS-Agro, which will continue receiving financial assistance from the Central Bank in order to revive it, Interfax reported. JAC STAVROPOL CLOSES BORDER WITH CHECHNYA. Stavropol Krai Governor Aleksandr Chernogorov ordered on 7 April the closure of the administrative border between his territory and Chechnya, ITAR-TASS reported. All movements of peoples and goods along the 113-kilometer strip of land have been banned. Chernogorov justified his decision by citing the murder on 6 April of four policemen in the Kursk raion of the krai allegedly by a Chechen crime gang. Because of rising crime, Kursk policemen had been offering--for a fee--to escort cargo through their district (see "RFE/RL Russian Federation Report," 7 April 1999). In addition, Kursk raion head Sergei Logvinov announced that transit between towns in the raion would be banned between the hours of 8 pm and 6 am, "Izvestiya" reported on 8 April. JAC SIBERIAN REGIONS WRANGLE OVER CREATION OF SPECIAL ECONOMIC ZONE. The East Siberian Railroad and the governments of the Buryatia Republic and Chita Oblast are attempting to establish a special economic zone along the Baikal-Amur Railway in order to boost the railway's revenues and the economies of the regions it traverses, "EWI's Russian Regional Report" reported on 8 April. They believe that attracting industry along the railway line is key to making it self-supporting. They will likely encounter some resistance in the legislative assembly of Irkutsk Oblast, which will debate a bill establishing such a zone on 27 April. The government of Irkutsk opposes the bill because it would lose tax payments it receives from the exploitation of valuable mineral deposits in the zone, such as the Kovyktin gas field and Sukhoi gold deposit. According to the report, Irkutsk Deputy Governor Yurii Berezutskii believes that Irkutsk should prepare its own version of the law. JAC NEW TEACHERS STRIKE IN THE FAR EAST. A teachers strike in Petropavlovsk-Kamchatskii in the Kamchatka Oblast continued for a third day, Interfax-Eurasia reported on 7 April. Teachers at 16 schools and kindergartens are protesting an almost six-month backlog of unpaid wages. JAC YELTSIN EXPANDS SECURITY COUNCIL MEMBERSHIP. President Yeltsin ordered on 7 April that a special decree be prepared adding Federation Council Chairman Yegor Stroev and State Duma Chairman Gennadii Seleznev to the Security Council, ITAR-TASS reported. JAC. TRANSCAUCASUS AND CENTRAL ASIA CANADA TO HELP PRIVATIZE ARMENIAN TRANSPORT SECTOR. Armenian Transport Minister Yervand Zakharian told journalists in Yerevan on 7 April after meeting with his visiting Canadian counterpart, David Collonate, that Ottawa will provide technical assistance in privatizing and restructuring the country's transportation sector, RFE/RL's Yerevan bureau reported. Zakharian said the Canadian government will help Armenia privatize state-owned Armenian Airlines and that a "tentative agreement" has been reached whereby Armenian Airlines will lease several middle-range commercial jets from Canada to replace its aging Soviet aircraft. LF OSCE CHAIRMAN POSTPONES TRIP TO TRANSCAUCASUS. OSCE chairman Knut Vollebaek has postponed his trip to the Transcaucasus that was due to begin on 13 April, Turan reported on 7 April, citing unnamed diplomatic sources in Baku. Instead, Frank Lambach, who is Germany's representative to the OSCE Minsk Group, will travel to Armenia and Azerbaijan on 5-7 May. An OSCE spokesman told RFE/RL on 8 April that the primary reason for Vollebaek's decision was the situation in Kosova, and that he may visit Armenia and Azerbaijan in August. LF AZERBAIJANI OIL CONSORTIUM CUTS BACK ON PRODUCTION. Azerbaijan International Operating has halved production from the Chirag Caspian field, from 100,000 barrels per day to 50,000 bpd, as a result of the closure of the Baku- Novorossiisk oil export pipeline, Turan and ITAR-TASS reported on 7 April (see "RFE/RL Newsline," 6 April 1999). ITAR-TASS quoted Ilham Aliev, vice president of the Azerbaijani state oil company SOCAR, as saying that more crude would be transported through the western Baku-Supsa pipeline. But oil experts point out that the capacity of that pipeline is only 40,000 bpd. LF ABKHAZIA CHALLENGES TBILISI OVER DETAINED FISHERMEN... Abkhaz Security Minister Astamur Tarba said on 7 April that the Abkhaz leadership has begun negotiations with Tbilisi on exchanging the 10-man crew of a Georgian fishing vessel detained in Abkhaz territorial waters on 3 April for four Abkhaz civilians held prisoner in Georgia, Caucasus Press reported. But Georgian intelligence service press spokesman Archil Chkhartishvili said those negotiations are likely to be complicated by the fact that the four Abkhaz are being held by Georgian guerrillas who do not take orders from the central government. LF ...AND ACCUSES GOVERNMENT-IN-EXILE OF 'TERRORIST' ATTACK. Also on 7 April, Tarba told Caucasus Press that he has evidence that the Security Ministry of the so-called Abkhaz government-in-exile, representing ethnic Georgians forced to flee Abkhazia during the 1992-1993 war, was responsible for a 2 April landmine explosion in Abkhazia's Gali raion. Four people were seriously injured in that explosion, which Tarba said had been intended to kill Konstantin Ozgan, who heads the Abkhaz commission that is overseeing the unilateral repatriation to Gali of ethnic Georgian displaced persons. Ozgan had traveled to Gali that day to meet with Georgian repatriates. Abkhaz Security Minister-in-exile Vitalii Mikhelidze denied the accusation. LF IS ADJAR LEADER IN DANGER OF BEING KILLED? A leading security official from Georgia's Black Sea republic of Adjaria is currently in Tbilisi investigating the claims by Georgian Interior Ministry employee Omar Kedelashvili that he was ordered by Georgian intelligence to assassinate Adjar parliament chairman Aslan Abashidze, "Rezonansi" reported on 7 April. Georgian security officials have denied Kedelashvili's allegations. A spokesman for Abashidze, who for the past seven years has ruled independently of the central Georgian government in Tbilisi, told Interfax on 7 April that Georgia's expression of support for the NATO air strikes against Yugoslavia are "a departure from...balanced foreign policy" and run counter to Georgia's declared policy of strategic partnership with Russia. LF KAZAKHSTAN'S TENGE STABILIZES. The exchange rate for Kazakhstan's currency against the dollar rose by over 17 percent on 7 April and a further 4.7 percent on 8 April, Interfax reported. As of 8 April, the tenge was trading at 112.79 to the dollar, compared with an average of 118 to $1 the previous day and 138.5 to the dollar on 5 April. National Bank chairman Karim Masimov told journalists on 7 April that the exchange rate should be set at 115-120 tenge to the dollar. President Nursultan Nazarbaev told journalists in Astana on 7 April that the decision by the government and National Bank to allow the tenge to float was a normal reaction to "a crisis environment," and should not be regarded as "a disaster." He predicted that inflation will remain low and that the tenge will not fluctuate widely (see also "End Note" below). LF KYRGYZ OFFICIALS DOWNPLAY IMPACT OF TENGE DEVALUATION. Acting Prime Minister Boris Silaev said on state television on 7 April that the government of Kyrgyzstan is taking measures to stabilize the som, which he said will not fall further in value, Interfax reported. Silaev said the initial decline in the som's exchange rate to the dollar was a natural reaction to the devaluation of Kazakh's tenge. He added that the government will discuss whether amendments to the 1999 budget, or the adoption of an austerity program, are necessary. Acting National Bank chairman Ulan Sarbanov said the official som/dollar exchange rate was 36.5:1 on 7 April, and that the Bank will make every effort to stabilize it at 36-38.5 soms to the dollar. LF TAJIKISTAN, RUSSIA SIGN PROTOCOL ON DEFENSE COOPERATION. On 7 April, the final day of his three-day visit to Dushanbe, Russian Defense Minister Igor Sergeev and his Tajik counterpart, Sherali Khairulloev, signed a protocol on military cooperation for 1999, AP-Blitz reported. Sergeev later told journalists that the agreement formally allowing Moscow to maintain a military base in Tajikistan will be signed during President Imomali Rakhmonov's visit to Moscow later this month, ITAR-TASS reported (see "RFE/RL Newsline," 7 April 1999). LF END NOTE Mostly Silence On Impact Of Kazakh Currency Float By Robert Lyle The international financial community is keeping a discreet silence on Kazakhstan's attempt to float the foreign exchange rate of its currency, the tenge, and the impact this is having on the country's neighbors. The International Monetary Fund (IMF) resident representative in Almaty, Paul Ross, praised the move earlier this week saying it would "restore the competitive position" of Kazakhstan globally and help promote growth. He said it should have a positive impact on Kazakhstan's trade balance by heading off protectionist pressures which have emerged in the last few months. It should also help reduce the high interest rates in the country, he said. Additionally, said Ross, the move will reduce the vulnerability of the economy to future external shocks like the Russian financial crisis. On 7 April the World Bank's resident representative, Kadry Tanzhu Yurukoglu, added his institution's endorsement, calling the currency float "a step in the right direction" which will both improve Kazakhstan's competitiveness and its macroeconomic stability. But beyond those comments, the IMF, the World Bank, and even commercial financial analysts have had nothing more to say about the early effects of the move and its impact on neighboring countries, especially Kyrgyzstan. Kazakhstan Prime Minister Nurlan Balgimbaev said the move was necessary because since the start of the Russian financial crisis, Kazakhstan's foreign trade has decreased by $1.3 billion due to dramatically reduced exports. Kazakhstan's exports were far too expensive, especially in countries like Russia, because the tenge was being traded at such a high rate. But the country's trade union federation said that while Kazakhstan's export competitiveness may improve, it believes workers will be hurt. The federation predicts a radical drop in consumer purchasing power because it believes the floating tenge will hurt, not help, trade. While there were reports of some hoarding of goods by consumers who quickly cleaned out retail stores in anticipation of higher import prices, the country's bankers late on 7 April said there had been no run on deposits at the Narodnyi (National) Bank and that the supply of hard currency and the demand for it were about equal. That would indicate, said National Bank Chairman Kadyrzhan Damitov, that the rate of around 118 tenge to the dollar is a relatively adequate reflection of the market. Kyrgyzstan, which saw its currency, the som, drop in reaction to the moves in Kazakhstan, waited anxiously as the som began to recover on 7 April. Still, observers in Bishkek were noting that privately-owned exchange officers were not trading after the previous day's 14 percent drop in the som's exchange rate. Government officials have been meeting with banks and other domestic financial organizations to look for ways to invigorate the development of small and medium-sized businesses as a way to broaden and strengthen the country's basic economy. That is precisely why the IMF, the World Bank, and others have refused to comment any more beyond endorsing the concept. It is a policy that the head of the U.S. Federal Reserve (Central Bank), Alan Greenspan, and senior American treasury officials have followed religiously -- never comment on exchange rates. No matter what the comment is, they all say privately, it can have dramatically unexpected consequences. So the IMF, the World Bank, and others will continue their discreet silence for the foreseeable future, allowing their pointed inattention (they hope) to help take the focus off the exchange rate and return it to building more solid, market-oriented economies. An IMF team will be flying to Kazakhstan at the end of this month to begin Almaty's annual review and to help decide what further lending the fund may need to provide. Kazakhstan is finishing up a three-year extended facility loan and is expected to draw the final $218 million shortly. The annual review will be the time when the fund can tell Almaty and the rest of the world just how it believes the currency float has been handled. Robert Lyle is an RFE/RL senior correspondent based in Washington. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Copyright (c) 1999 RFE/RL, Inc. 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